Saturday, July 19, 2008

Happy Birthday

Happy 7th Birthday to B.

Friday, July 18, 2008

Re: LJ's comments on open borders

This is in response to LJ's comment about open borders that I'll quote here because there's so much good stuff in it that it should be a post:

love johnson said...
IMHO, there isn't anything more boring or a total beating than trying to read a book about economics. They are always too complicated and while the theories always sound great, the practical applications never seem to work out.

That being said, please explain how opening the borders would make the labor market operate more "freely"? My understanding is that illegal immigrants drive down wages, so wouldn't MORE cheap labor, whether legal or illegal, drive wages down more? One always hears the arguement that these workers are doing jobs that we Americans won't. I've never agreed with that - it's that Americans won't do them because the pay is too low to sustain an average standard of living that we are accustomed to, not the specific job itself.

What I do find interesting about your question about Republican philosophy and free markets is how fluid their philosophy seems to be. Killing prisoners is fine, abortions are not. Let the free market / capitalism dictate what happens, but if cerain business's or industries fail, then it's OK to bale them out. They hate "judicial activism", but only when the case goes against their beliefs (recall the Schiavo case). They claim they want to keep the government out of our lives ("small government"), but want the government to intrude into the sex lives of Americans, to increase the profile of religion (but only Christianity) in public schools and public buildings.

I realise that I'm WAY in over my head with any economic discusion. That's why I'd rather let someone else read the book and explain it to me! :)

Scooter will correct me if I'm wrong, but I think that government regulation by definition is an unwelcome restraint on the operation of a free market economy. In the case of labor, our immigration policy limits the number of people who can come to the U.S. and work, and therefore it's a constraint on the available supply of labor, and therefore, as LJ says, it keep wages higher than they would otherwise be (and results in a higher cost to manufacture goods). Free marketeers think that's a bad thing, I believe, which is why you'd expect them to object to restrictions on immigration. I believe (without having read the book and relying on what little I gleaned from the Colbert Report interview) that Jason Riley makes the case that if you're all about the free market, then you should also want unrestricted immigration.

Don't you just hate it when your xenophobia cuts into your profits?

Hear, hear, about the schizophrenia in Republican philosophy in recent decades. But, I grant, our side can be inconsistent too as I'm sure Michael or Scooter will point out.

Wednesday, July 16, 2008

Chaotic worldwide economic conditions

I just had a fascinating conversation with a client who has goods manufactured in China. One of the reasons that goods are manufactured more cheaply in China (and many other countries) is because the government subsidizes production (not merely that labor is cheaper, although I suppose it's all intertwined). Now, with oil prices skyrocketing, the governments can't afford to subsidize industry at the same level, so the cost of manufacturing is skyrocketing. For his products, the price is up 30-40% over the past 6-8 months. (His products are plastic so include oil as a raw material; of course, oil also affects transportation costs of raw materials and finished goods.) He describes that industry in China is unsophisticated about cost accounting and cost control, because it is relatively uninterested in profit and has little ability to control costs due to government's unilateral choices about funding. The management skills that would be required to manage for the rapidly escalating fuel costs just don't exist there, so the Chinese manufacturers can't say what price they'll sell for until about the time they ship, so orders have to be placed without knowing the cost or with little notice. (Manufacturing contracts, where a price is specified for future sales, are essentially unenforceable, so there's no protection against this kind of price fluctuation.) The result for my client is completely unpredictable cost of the goods he sells. The cost increases have been so rapid that he is having a difficult time committing to the price that he will sell at. He has to tell customers that they must place an order for October now, but he won't be able to tell them how much it will cost until September, for example.

Tuesday, July 15, 2008

Open borders and free markets

On Colbert tonight is Jason L. Riley, member of the Wall Street Journal Editorial Board and a conservative, who has written a book (Let Them In - The Case for Open Borders) on a topic Michael and I have explored. Riley's book argues for opening the borders to immigrants so that the labor market operates more freely. If the Republican Party were really a party that champions free markets, wouldn't their immigration policy be in line with Riley's open-border philosophy? If not, why not?

Monday, July 14, 2008

A Million Little Pieces/My Friend Leonard/Bright Shiny Morning

James Frey. If you don't know about him and the Oprah controversy, look it up. This first two books are some combination of fact and fiction; the last is a novel. I would not have read them had T not suggested them. AMLP is an ugly immersion in a chaotic mind. MFL is a continuation of the story started in AMLP. It's not clear what's real and what's not so I'm not sure what to make of them. BSM is wildly different from anything you've read; engrossing; and ultimately, horribly depressing. Enjoy!

Be warned that Frey has an idiosyncratic writing style that takes some getting used to but in the end works for what he's doing.